President Walks Softly in Bush Country; Dems Struggle with Tax Cuts; President Obama-Bill Clinton Proxy War

Aired August 9, 2010 - 17:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, ANCHOR: Thanks, Rick.

Happening now, a new snub to President Obama's role as commander- in-chief -- he's being ignored by another Democratic candidate.

I'll ask the senior White House adviser, David Axelrod, about that and whether it's time for the president to stop blaming George W. Bush.

Also, one armed and very dangerous fugitive is captured in Wyoming, but another is still on the loose and may be gunning for new victims. We're following the prison break drama.

And the bad economy is forcing more people to take early retirement and that's putting a serious strain on Social Security. Some unpopular solutions could put your long-term plans and your benefits at risk.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

President Obama is in Texas right now. It's almost 100 degrees, but he may be feeling a November chill in the air. He's fighting to help Democrats in the mid-term election, now less than three months away. That's even more difficult when you're on George W. Bush's turf and even some members of your own party don't necessarily want to be seen with you.

Our senior White House correspondent, Ed Henry, is traveling with the president in Texas -- Ed, thanks very much.

We heard the president invoke President Bush's name a couple of times last week, saying some critical things about his predecessor.

Today at that DNC event in Austin, did he do the same?

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, Wolf, no mention of the former president here today in what you might call Bush country. White House aides insist to me that the president was not shying away from a fight or anything like that. But I am told by two people inside the former president's camp that in the Bush camp, it was not received well last week -- this broadside. So maybe today the White House felt not -- that it was better to not get too personal while being here in Texas. Nevertheless, the president was very direct in going after the Republicans in general, charging they've been dawdling while he's trying to rebuild the economy.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The point is that there's been a fundamental lack of seriousness on the other side. We have spent the last 20 months governing. They've spent the last 20 months politicking. Now, we've got three months to go and so we've decided, well, we can politic for three months. They've forgotten I know how to politic pretty good. And so I'm happy to make this argument.

(APPLAUSE)

OBAMA: I am happy to have this debate, over the next several months, about what their vision of the future is, because they don't have one.

(END VIDEO CLIP)

HENRY: Now the Republican National Committee was quick to blast out an e-mail, charging some hypocrisy on the part of the president for accusing Republicans of politicizing things at the same time that he's at a fundraiser here in Austin, raising over a million dollars for Democrats. He's headed right now, in fact, to a second fundraiser in Dallas -- Wolf.

BLITZER: You know, it's an interesting picture.

When he arrives in Texas, the Republican governor, Rick Perry, is there at the airport to greet the president of the United States. But the Democratic gubernatorial candidate, Bill White, the former mayor of Houston, is not anywhere near the president on this day.

What's going on here?

HENRY: Yes, a great political opportunity for the Republican governor, who is running for election, Rick Perry, to not only look like the better man there by standing next to the president, welcoming him here to Texas, but he handed him a letter about border security, an issue that the -- the governor is pushing strongly right now.

Bill White, the Democratic candidate, was not there. The White House insists they're not insulted by him not being there.

But this just points out, when you follow up on the fact that just last week in Atlanta, the Democratic candidate for governor in Georgia, Roy Barnes, would not appear with the president, either. There are some states, like Georgia, Texas, this president is just not that popular. And it would be a bigger hindrance for Democrats if he was appearing with these candidates. The White House in private will say, look, we've known this all along. There are some states that he can raise money at, but he can't appear with candidates. That's why, in fact, they've already recruited surrogates, like former President Clinton, who can do better in the South, to -- to appear in states like Texas, Arkansas and Kentucky -- Wolf.

BLITZER: All right, Ed.

Thanks very much.

And stand by.

We'll hear what the senior White House adviser, David Axelrod, has to say about Democrats like Bill White, who are keeping their distance from the president.

HENRY: Thank you.

BLITZER: David Axelrod will be joining me later here in THE SITUATION ROOM.

Check out some other big name political figures out on the campaign trail in Georgia today. Sarah Palin is stumping for Republican gubernatorial candidate Karen Handel. Handel faces Nathan Deal in tomorrow's primary runoff.

In Florida, Jeb Bush is campaigning with a candidate for his old job. Bill McCollum is in a tough battle with Rick Scott for the GOP nomination for governor.

We're heading full steam into the busy season of this mid-term election year. Democrats are longing for the kind of momentum they certainly had back in 2008.

Which party will drive the political discussion this time around?

Our senior political analyst, Gloria Borger, is here -- Gloria, there's a huge internal debate that the Democrats are having right now -- the White House Democrats, the Democrats in Congress -- how to play this whole issue of taxes, because it's -- they've got to make a major decision.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: They do have to make a decision. It kind of landed in their laps. George W. Bush's tax cuts expired January 1st. And the Democrats have to decide what they want to do.

It's very clear what they want to do is repeal the tax cuts for the wealthy, which is the upper 2 to 3 percent of Americans, and keep the tax cuts in place for the middle class. Nobody wants to be talking taxes around election right now. But they've got to deal with it.

So I -- I spoke with a senior House Democrat today, who said they're going to try and make the best of a bad situation, which is make the tax cut -- there is one argument among Democrats. Make this tax cut the centerpiece in September. And they feel that they can do it, that it helps their narrative along, because, first of all, it ties Republicans to George W. Bush, which -- trying to keep tax cuts for the wealthy. It turns around the Republican claim that they care about the deficit, because if you kept these tax cuts in place, it would add $2 trillion to $3 trillion to the deficit. And, again, show the Democrats that they care about the middle class and, hopefully, that would bring out their base voters in the fall.

Again, trying to make the best out of a bad situation.

BLITZER: Yes, because the president wants to keep the 2001-2003 tax cuts for the -- those earning less than $250,000 a year.

BORGER: Exactly. Exactly.

BLITZER: For those who are earning more, he wants them to go back to the old tax rate, 39.6 percent, or whatever, that occurred during the Clinton administration, from 35 percent...

BORGER: Right.

BLITZER: -- where it went down at -- the Republicans have a response to all of this.

BORGER: Yes. The Republicans say, this is fine with us, come into our wheel house here, we're happy to talk taxes.

Let's listen to what Congressman Boehner said Sunday on "Meet the Press."

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), MINORITY LEADER: You cannot get the economy going again by raising taxes on those people who we expect to create jobs in America and to get the economy going again. If we want to solve the budget problem, we've got to have a healthy economy and we have to get our arms around the runaway spending that's going on in Washington, DC.

(END VIDEO CLIP)

BLITZER: And I guess the argument that the Republicans are going to make is, don't, in the middle of a tough economic time...

BORGER: Right. And this Democrat today said to me, well, if the wealthy are the ones that created jobs, what happened to the millions of jobs that were lost under George W. Bush?

So they're going to make that argument right back. They're going to say it's not something we can afford right now. However, there are Democrats, Wolf, on the flip side of the argument. There are Democrats who say any time we focus on taxes, we lose, so why should we focus on taxes, let's talk about other things. Let's talk about health care. Let's talk about jobs. But there are some Democrats who say, this is interesting, which would Democrats rather be talking about right now?

Would they rather be talking about tax cuts for the middle class or jobs?

(INAUDIBLE) tax cuts.

BLITZER: The president really has to be out front on this...

BORGER: Absolutely.

BLITZER: Between now and November 2nd.

BORGER: They're only going to do this if the president is out there leading. And don't forget, he did pretty well in 2008 when he talked about no tax increases for middle income Americans. It worked for him once. They're hoping it can work again.

BLITZER: All right, Gloria. There's going to be a lot of excitement between now and November 2nd.

BORGER: Yes.

BLITZER: The murder of aid workers in Afghanistan, including Americans -- the Taliban now taking responsibility. But there are tough questions about their tactics and their motives.

Stand by.

Wait until you hear the running tab on the BP oil disaster in the Gulf. We have new information coming into THE SITUATION ROOM.

And we're live in Colorado on this, the eve of a Democratic primary race that's testing President Obama's clout compared to Bill Clinton's.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is here.

He has The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Wolf, as the debate over illegal immigration. And now over the 14th Amendment heats up, we have some numbers you might be interested in.

In Texas alone, there are more than 60,000 babies born to non- citizens every year. These babies automatically become U.S. citizens. "The Dallas Morning News" reports last year, these births represented 16 percent of the total births statewide in Texas and that from 2001 to 2009, there were more than 542,000 babies born to illegal immigrant women.

Let me repeat. All these children automatically become U.S. citizens. And we're talking just about the State of Texas here.

This is why some people, including a lot of Republicans, want to consider changing the U.S. Constitution's guarantee of citizenship for anyone born in the United States. House Minority Leader John Boehner says many illegal immigrants come here just so their children can become U.S. citizens. Boehner points to parts of our country where schools and hospitals are being overrun by illegal aliens.

Other Republicans say if both parents are here illegally, why should there be a reward for that behavior?

And they've got a point.

But opponents worry about the kids, saying that they didn't break any laws, they would have no rights and nowhere to go. Others claim the whole issue isn't about babies at all, rather about politics and using immigration as a wedge issue heading into the mid-term elections.

The 14th Amendment became law in 1868. It was meant as a way to block states that prevented former slaves from becoming citizens. Changing it would require a two-thirds vote in both the House and Senate, plus the approval of three fourths of the state legislatures.

My guess is, if it was put to a vote of the American people, it would have passed yesterday.

Here's the question -- at least 60,000 babies born to non- citizens every year in Texas alone get U.S. citizenship.

What should be done about that?

Go to CNN.com/caffertyfile and post a comment on my blog.

BLITZER: One of the issues, Jack, I'm going to be speaking with David Axelrod about later here in THE SITUATION ROOM, as well -- precisely where does the White House stand on this sensitive issue?

OK, Jack, thank you.

Just hours from now in Colorado, a political proxy war between President Obama and Bill Clinton will play out. Democratic Senator Michael Bennett is facing a bitter primary challenge that's dividing the Democratic Party.

Our national political correspondent, Jessica Yellin, is in Denver right now watching all of this unfold.

All right, what -- what's going on with the Democrats right now -- Jessica?

Uh-oh. It looks like we just lost our -- hold on.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: And (INAUDIBLE)...

BLITZER: Jessica, hold on one second. We -- we lost you for a second. But, go ahead. Start. We just got you back.

YELLIN: Sorry about that, Wolf.

It is the president's man here versus the former president's man. And the race right now, Wolf, is just too close to call.

Michael Bennett was named to replace Ken Salazar when he left the Senate and went into the new -- into President Obama's cabinet. And Michael Bennett has had the full backing of President Obama. In fact, the president has done more for Bennett than he has for just about any other Democratic candidate this cycle.

But he is being challenged by Andrew Romanoff, a man Bill Clinton has known and worked with since 1992. Andrew Romanoff backed Hillary Clinton during the 2008 presidential race. And though Clinton has shown his loyalty by coming out for Romanoff, not only did he send an e-mail on his behalf, he did a robo-call for him yesterday, today.

And we'll see. Right now, it is neck and neck. Early balloting is big in this state, so some of the votes -- many of the votes have already been cast. We'll see how much difference election day makes, Wolf. But right now, this one is a nail-biter.

BLITZER: Yes. Well, Andrew Romanoff, he's running as the so- called outsider, who doesn't want to take PAC money and stuff like that.

Is that a -- does that seem to be attracting Democratic voters in Colorado?

YELLIN: It does. It does. It's a key part of his message here. And, Wolf, basically, he has adopted President Obama's message from the 2000 out state campaign, challenging a Washington insiders -- Washington special interests -- and accusing his opponent, Michael Bennett, of being a Washington corporatist insider, even though Bennett has barely been in the Senate a year and a half and never ran for office before.

Let's listen to their back and forth.

We interviewed them both -- both of them on this very issue.

(BEGIN VIDEO CLIP)

ANDREW ROMANOFF (D), COLORADO STATE SENATE CANDIDATE: Every member of the Senate has a chance to stand up to special interests and their own party's leadership.

I'm doing that, of course, right now by running against the wishes of the national political establishment. It is unusual to see the national party put its thumb on the scale of this contest. As we're speaking today, literally, phone banks are being run out of the headquarters of the Democratic National Committee telling Coloradoans how to vote. That doesn't sit well.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. MICHAEL BENNETT (D), COLORADO: Until 18 months ago, I had never run for office before. I had spent my whole life outside of politics. And to have a career politician attacking you for being an establishment candidate, I think, just isn't washing with people in Colorado.

(END VIDEO CLIP)

YELLIN: Now, Wolf, even though they're both trying to out outsider each other, the truth is their politics are quite similar. And you can imagine they would run fairly similar campaigns in the fall against the Republicans.

The big reason to watch this state, of course, it's a purple state that President Obama turned blue last year. It will be interesting to see if it stays blue or goes red in November -- Wolf.

BLITZER: Well, we'll be watching.

There's a GOP contest tomorrow, as well, that's causing a lot of buzz out there.

Tell us about that one.

YELLIN: Yes. I'll have more on the GOP tomorrow, Wolf. But bottom line, you have a Republican candidate picked by the establishment being challenged by another Republican, who's backed by the Tea Party here. And it will be another test of the Tea Party's power in this state.

I'll tell you more about that one tomorrow.

BLITZER: All right. We'll be watching tomorrow, as well. We'll be watching all of these races coming up in the next few months.

All right, thanks very much.

Jessica is in Colorado.

We're just getting a new statement in from the former vice president, Dick Cheney's office, regarding his health. We're going to have that for you in just a moment. Stand by.

Also, a desperate effort now underway for the second -- a desperate search underway for the second of two escaped prison felons on the run.

Brian Todd is standing by with the latest.

And the Defense secretary, Robert Gates, now proposing major budget cuts over at the Pentagon. Where does he want to trim the fat?

BLITZER: We've got a -- a formal statement just coming into THE SITUATION ROOM right now from the office of former vice president, Dick Cheney, that he's now been released from the hospital. We reported earlier that he's been released.

But here's the statement: "Former Vice President Cheney was released this morning from the Inova Fairfax Heart and Vascular Institute." That's in Northern Virginia, outside Washington, D.C.: "As he continues his recovery at home, he and his family expressed their gratitude for the tremendous care he has received from the medical staff at Inova Fairfax and at George Washington University Hospital." That's here in Washington, DC.

they also want to thank the many people who have reached out with letters and prayers and warm wishes.

We, of course, wish the former vice president a speedy, speedy recovery.

Good luck to Dick Cheney.

Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now -- Lisa, what else is going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, Defense Secretary Robert Gates unveils a plan to cut his department's budget. The proposal includes eliminating the U.S. Joint Forces Command. Gates says the Pentagon has a, quote, "top heavy hierarchy that's stuck in the 20th century."

The cost of the Gulf oil disaster response now tops $6 billion. BP says the new number covers containment efforts, grants and federal costs. Meanwhile, the Justice Department announced that details have been finalized on the $20 billion escrow account that BP has promised to fund. The oil giant has made an initial $3 billion deposit into that fund, which will aid those suffering the spill's effects.

And actress Mia Farrow is disputing supermodel Naomi Campbell's testimony in the war crimes trial of former Liberian president, Charles Taylor. Campbell testified last week that she wasn't aware that it was Taylor who had sent her so-called blood diamonds during a 1997 visit to South Africa. But Farrow, who was with Campbell at the time, tells the court that isn't true. The blood diamonds are used to fund rebels and war loads -- warlords.

And it's being called a feat never been accomplished before. British explorer Ed Stafford has just completed a two year, 4,000 mile trek along the Amazon river. The 859-day journey, which ended in Brazil, was intended to raise international awareness about deforestation. Stafford says the first thing he'll do when he returns to his native England is to grab a pint of beer.

I think he probably deserves that, don't you -- Wolf.

BLITZER: I think the second thing he'll do is grab a second pint of beer, as well.

SYLVESTER: I think you're right.

BLITZER: All right. Thank you, Lisa.

We'll get back to you.

A deadly attack on aid workers in Afghanistan -- will it threaten U.S. policy there, plans for American troops to come home?

Also, Michelle Obama -- how much will she campaign between now and the November 2nd mid-term elections?

I'll ask the president's senior adviser, David Axelrod, about the first lady's role and also about some new criticism of her.

And if you're hoping to take an early retirement, you may be out of luck depending on how a new fight over the future of Social Security turns out.

(COMMERCIAL BREAK)

BLITZER: You're in THE SITUATION ROOM.

Happening now, police nabbed one of two convicted felons on the run after escaping prison. Our Brian Todd has the latest on a desperate manhunt now underway for the remaining suspect and this warning -- he's considered armed and very dangerous.

Could new strains on the Social Security system now mean raising the age you can retire?

Why the debate is heating up all across Washington right now.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Secretary of State Hillary Clinton now condemning the horror in Afghanistan after 10 multinational aid workers, including six Americans, were shot to death one by one. The Taliban now claiming responsibility for the devastating attack.

Our Pentagon correspondent, Chris Lawrence, is monitoring this story for us.

All right, Chris, tell us the latest.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, you know, security in Northern Afghanistan had been deteriorating long before this attack. In fact, a lot of the German troops have been fighting some pretty tough battles all throughout that area since last spring. And up to 5,000 more American troops and helicopters to support them are scheduled to deploy here by fall in order to back them up.

(BEGIN VIDEOTAPE)

LAWRENCE: (voice-over): Just last month, Afghan Army soldiers, supported by American advisers, kicked the Taliban out of Nuristan. But hundreds of insurgent fighters escaped and some went east, into the southern tip of Badakhshan. That's the remote area where 10 foreign aid volunteers were working, giving villagers free health care.

HILLARY RODHAM CLINTON, SECRETARY OF STATE: But according to the Taliban, they were stopped on a remote road, led into a forest, robbed and killed.

LAWRENCE: They were unarmed and working for free. The Taliban claims the aid workers were trying to convert villagers to Christianity, which the groups deny. My colleague, Jill Dougherty, is in Kabul and says the International Assistance Mission still isn't sure what motivated the attack.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: The executive director says that there are conflicting reports on why the murders happened.

What was the motive?

Was this an attack -- a direct targeting of those workers by the Taliban -- or could it have been a robbery for which the Taliban are taking responsibility?

So this organization is looking very carefully at an investigation that's being carried out by the Afghan government, as are other international organizations.

LAWRENCE: Both say they won't pull out of Afghanistan. But Secretary Clinton says the murders won't scare off the State Department either, whose efforts to build civilian institutions is an essential part of the U.S. strategy.

CLINTON: As we mourn the loss of these brave aid workers, we will continue with our own efforts and we will be inspired by their heroism, their compassion and their love for the Afghan people.

(END VIDEO TAPE)

LAWRENCE: Now, the Taliban recently released a new code of conduct that authorizes their fighters to go after foreigners and aid workers, really, in a way they had not before. So despite these groups' commitment, it does have the potential to make it much more dangerous to deliver aid there -- Wolf.

BLITZER: All right, Chris.

Thanks very much.

Chris Lawrence working the story at the Pentagon.

Let's get some more on this situation in Afghanistan.

Joining us, our senior political analyst, David Gergen.

Let me read from Bloomberg News today -- Al Hunt writing this, quoting Gordon Goldstein, who's a professor who knows a lot about the Vietnam War, has written a major book on it: "Goldstein argues it's clear the counter-insurgency and population protection policy, as out in General Stanley McChrystal's manifesto last summer, is failing, reminiscent of the grandiose plans McGeorge Bundy promulgated in Vietnam back in the 1960s."

How much of a comparison -- because you -- you and I both lived through the Vietnam era -- David, how much of a comparison and analogy is there between what happened in Vietnam and what's happening now in Afghanistan?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: Well, there's one possible comparison, Wolf. It's also possible to compare this to Iraq, when it seemed hopeless at one point. Many people wanted to pull all the plugs out. And -- and the United States had a surge and -- and it got a lot better. It's not -- it's certainly not stable yet, but it's a lot better than what it was.

So I think one has to be careful about choosing which -- which analogy you -- you think is -- applies.

What I do think, Wolf, is that -- is these murders have a special poignancy here in America, because so many Americans have fallen in love with Greg Mortenson's book, "Three Cups of Tea," which describes his long years of bravery and generosity and compassion in building schools in Afghanistan. And they learned about what it's like to be out there.

So -- and Mortenson, who was found in his home in a -- Bozeman, Montana this weekend, said -- pointed out that this area where these aid workers was is just terribly poor. It's the highest maternal mortality rates in the world are found where these aid workers were. So they were very brave people.

I do think, as Mortenson points out that, in the future, people who are going to -- who do these aid missions -- are going to need more security when they go out.

BLITZER: Yes, they've got...

GERGEN: It's clear the Taliban is targeting them.

BLITZER: Whether it's the Taliban or just simble -- simple murders or whatever seeking to steal their money or whatever...

GERGEN: Right.

BLITZER: -- it's a dangerous, dangerous environment.

Now, you know, the new commander in Afghanistan, General David Petraeus, he's about to undertake a major media campaign to sell this war to an increasingly skeptical and nervous American public right now. And one of the arguments that's being made -- it's costing more than a hundred billion dollars a year, this war in Afghanistan, forget about Iraq for the time being -- money that could be spent on -- on education or health care or infrastructure, whatever, here in the United States.

It's a difficult sell to a lot of folks, who are saying, shouldn't we be spending that money here?

GERGEN: That's absolutely right. And it is -- I think it's an important factor that David Petraeus, who has been basically silent for seven weeks, is now essentially going on a media blitz over the next three weeks or so with -- with a number of interviews, making his case. And what -- what General Petraeus is arguing, I think, basically is, Wolf, that, listen, give us a little more time. He knows when he went there -- he told me and he told others -- he knows the window is starting to close. And I think what he's trying to do is keep the window open long enough to see if he can turn this around.

He doesn't know if he can succeed. It's a -- it's -- you know, it's a hard go. He knew there were going to be more fatalities.

But I do think for him to place it in perspective is important. He has more credibility right now than anybody I know on -- on what's going on over there.

BLITZER: And especially when -- when the argument is made, as Leon Panetta testified or said before the American public -- the CIA director -- not that long ago, by U.S. intelligence estimates, there are only about 50 to 100 Al Qaeda operatives in Afghanistan right now. Forget the Taliban, but Al Qaeda, per se, 50 to 100. That's a lot of money and 100,000 troops being spent and used to find 50 or 100 Al Qaeda terrorists.

GERGEN: It's a whole lot of money. And the question that General Petraeus will have to address is, you know, OK, so what's the alternative?

How much money is it going to cost us if there -- if there are new terrorist groups that have to set up camps there and find that to be a safe haven?

So there -- there are costs either way. You know, we -- we are not in a happy place as a country. And we are spending a -- a ton of money on these two wars in Iraq and Afghanistan.

And the question Americans are going to have to weigh is, OK, what is the price if we don't do this?

What is -- how much is it really worth to us? I don't think any of us knows the answers. But I do think it's going to be good to hear from General Petraeus on it.

BLITZER: Yes. It's always good to hear from General Petraeus.

All right, tanks very much for that, David.

Sarah Palin may be a self-proclaimed hockey mom, but she's sounding a bit like a southern bell today. Stand by to hear her ideas on campaigning Georgia style. Were some Democratic lawmakers were so eager to drop summer break plans and rush back to Washington, D.C.

(COMMERCIAL BREAK)

BLITZER: Sarah Palin is revealing her southern strategy. As we told you, the former Alaska governor is now campaigning in Georgia for Republican gubernatorial candidate Karen Handel. Palin acknowledged critics who say she is out of her element below the Mason-Dixon Line. I want you to listen to this.

(BEGIN VIDEO CLIP)

SARAH PALIN (R), FORMER ALASKA GOVERNOR: It is a long way from the Arctic Circle, let me tell y'all. I'll try to remember that, y'all. Okay. I told Piper, remember, we can't say, you guys, when we're here. We say, y'all. Now, you know, I have heard there are some politicos in these parts that are saying the same thing, that Alaska is far away. Some politicos in the machine may not think that others are familiar enough with the southern state to have an opinion on this race. Let me tell you, why do so many of us have an opinion on this race? Because it's epic. It's historic. The eyes of America are on you, Georgia, to see if you really do want that positive change and to get rid of that good ole boy network that really gets in the way of just doing the things that the people who want to hire a good governor are expecting from their government. So people are watching what's going on in Georgia. And, yes, it's true that I live outside the perimeter. Okay? Way outside. But let me tell you what I do know. I know that our country is at a crossroads. And I know that we've got an out of touch federal government right now that refuses to do things that it's supposed to do like secure our borders and enforce our laws. Now, instead, it over reaches into areas that it has no constitutional business being in like bailing out and taking over our private sector industries. And I know that we've got a European style debt crisis that is looming because the Obama/Pelosi/Reid agenda is driving the spending train putting all of us on it, driving us towards a cliff. We're going to be slammed with the largest tax increase in U.S. history if they don't act now. I don't know if you're hearing a whole lot about that in the main stream media.

(END VIDEO CLIP)

BLITZER: Palin went on to say she endorsed Karen Handel over Nathan Deal because she is the best Republican for the Georgia governor's job, not because she is a woman.

On Capitol Hill right now Democrats are getting a second chance to push forward their agenda before the fall campaign begins in earnest. The house speaker is calling members back to Washington this week interrupting their august break and quality time with voters back home. Let's bring in our Congressional correspondent Brianna Keilar. Why the urgency, Brianna?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Wolf, they don't want to wait. Democrats don't want to wait four weeks to pass this bill. Essentially a $26 billion jobs bill when they can kind of take advantage of the moment and make a dramatic statement. If you look behind me, it's actually kind of funny because of course I was here for about ten minutes before my live shot and this is the only person that we've seen walking through. This place is pretty empty. This is August. Congress goes away. Staffers go on vacation. The staffers that do actually come in to work pretty much roll in flip- flops and jeans. So this is Democrats coming back during recess saying, look. We're coming back to Washington. We are doing this because we care about jobs and so important for them especially when one of their major liabilities this election season is that 9.5 percent unemployment rate.

Now, this was a bit of a surprise for us because what happened was the house had already gone on recess when last week the Senate unexpectedly passed this bill, $26 billion. It includes $10 million for teachers to prevent teacher layoffs and also $16 billion to help states with Medicaid costs so that they don't come up short in other areas and have to layoff firefighters, police officers, et cetera. So Democrats say that this bill will save about 140,000 teacher jobs, 150,000 of those other jobs, but Republicans on the flip side say that's not the case. They say it's an election-year payoff to teachers unions and say this is just more big government spending by Democrats, Wolf.

BLITZER: Do the Democrats have the votes?

KEILAR: Right now speaker Pelosi is confident that she has the votes. However, leaders are aware that they are probably going to lose some Democrats on this, specifically the fiscally conservative Democrats. This is a really tough vote for those blue dog Democrats, Wolf. I spoke with one aide who said in an election year like this asking them to come back and vote yes on a $26 billion bill whether paid for or not and this one is paid for is just too tough of an ask.

BLITZER: All right. Brianna, thanks very much. We'll watch what happens this week in the house.

This isn't the first time Congress has been called back from recess early. For example, back in September of 2005 Republicans requested members return four days early to pass an emergency spending bill in the wake of hurricane Katrina's devastation.

Is it time for embattled Representatives Charlie Rangel and Maxine Waters to walk away from Congress for the good of the Democratic Party? We'll discuss that and more in our strategy session.

And the singer turned Haitian presidential candidate Wyclef Jean now firing back at the actor Sean Penn in the wake of some fiery, controversial allegations.

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BLITZER: Let's get right to our strategy session. Joining us our two CNN political contributors, Roland Martin and John Avlon. John is also a senior political columnist with thedailybeast.com. Let's talk about Maxine Waters and Charlie Rangel, two Democratic members of Congress. I can certainly understand, Roland, why they want to stay, have a trial, try to defend their reputations, defend their good names, but at the same time as you know a lot of Democrats would just as soon have them get some sort of plea deal, be reprimanded, censured so the Democrats don't face an embarrassment with formal trials in the Congress in September. What do you think they should do?

ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: Well, sure, but remember, when it comes to the ethics committee you have Republicans and Democrats who sit on the committee and they all have to sign off on it. I would also say that those same Democrats just like Republicans if you were accused of something and you believe you didn't do it, you would hope that you would be seen as innocent until proven guilty. These days obviously in politics it's guilty until proven innocent. So if I were in their shoes Charlie Rangel is 80 years old, Maxine Waters 71 years old. So what else are you going to do? I say you always fight for your name if you believe you did nothing wrong.

BLITZER: Although some Democrats, John, as you know and maybe even the president of the United States, think it would be better for the party if both of them, Maxine Waters and Charlie Rangel, just walked away from all of this.

JOHN AVLON, CNN POLITICAL CONTRIBUTOR: Sure. Look, the voters are very clear on this. Think back to 2006 when Republicans lost to the Democrats. Corruption and government ethics were the number one and two issues that year for voters. Think back to 1994. I mean, it's corruption for the party in power that ends up causing swing voters to say it's time for a change. So these are high stakes, high profile legislators. I understand their desire to try to clear their names as best they can but the reality is that this is what voters pay attention to. It's a symptom of the feeling that Washington and government are not working as well as they should. And so they have every right to be concerned. There is a larger problem there, too, a larger symptom of the sickness. Because of the redistricting, these Congressmen even if they come under great scrutiny and controversy and ethics charges they are almost certain to win their general election. The only way they'll get kicked out by the voters is if they're contested in a primary. That is a larger symptom of the sickness.

MARTIN: One fact needs to be clear, Wolf. That is Dan Rostenkowski was found guilty in a federal courtroom. He actually went to prison as opposed to the ethics committee. But you also had the gentleman out of Alaska, Young, who was under a serious cloud. What happened? He also was acquitted, spent some $1.2 million on his defense and he was found not guilty. The point there is, I agree with John absolutely but I do believe every American also would want to be seen as innocent until proven guilty and to have your trial, if you will, so I understand them saying, hey, put me on trial. If you convict me, fine. But I'm not going to walk away just because there is an allegation.

BLITZER: Do you think, Roland, the president sort of threw Charlie Rangel under the bus?

MARTIN: I believe that the president first of all he walked a very fine line by saying he should end his career with honor. Many people saw that as the president frankly saying to Congressman Rangel it's time to go. I certainly saw it that way as well. And so I believe that the president, what he should have simply said is there is a process that is here. Allow that to play out. Surely as the head of the party he doesn't want to equivocate but there is a problem when you look at a Charlie Rangel who has been there 40 plus years. I mean he also deserves his day in court like any of us would want.

BLITZER: Absolutely. If he wants to fight it he certainly should fight it and Maxine Waters should as well. They deserve their day in court. If they feel they didn't do anything wrong let them make the case. All right guys.

MARTIN: That is any of us.

BLITZER: Let me move to Nevada right now. John, I'll read you a quote from John Rolston. He's a political columnist TV guy writing in "The Las Vegas Sun" the voters' binding hatred of Harry Reid is the title of the article. "If Sharron Angle truly is as cuckoo as Harry Reid says she is and as her own words occasionally indicate, why isn't the Senate majority leader arguably the most powerful Nevadan in history, running away from her in the polls? It's almost preposterous, right? Sharron Angle defeating Harry Reid? Here is the rub. People hate Reid." What is your reading of what is going on in Nevada, John, right now?

AVLON: Look, Sharron Angle has been a gift to Harry Reid. I mean, she has confirmed every single worst stereotype that exists unfairly or not of the tea party movement. Look, extremes are always their own side's worst enemy. Harry Reid went into this race with a 35 percent approval rating with 35 percent approval rating. This is a serious anti-incumbent wind blowing. But the further out Sharron Angle gets, the more she confirms the worst stereotypes of the far right, the better Harry Reid looks by comparison.

BLITZER: Are you surprised, Roland, that this is as close a contest it's shaping up to be?

MARTIN: No because first of all and I understand the point the writer was making but if you actually go back six months, Harry Reid was the one who was way behind. In fact, it's a miracle that he's actually caught up and passed her in the polling data. Remember, this guy was in the doldrums there. You're right. People are angry at him, but you have to point to the fact his leadership, it's not like he's also a very charismatic guy. So a lot of people really aren't excited about that as well. But there's also a history of strong Democrats in position losing. Tom Foley lost. Remember, you also had Tom Daschle losing, and now you have Harry Reid.

BLITZER: And if Sharron Angle defeats Harry Reid, that will be a major, major story obviously going forward. Thanks, very much, Roland and John, a good pair here.

At least 60,000 babies born to noncitizens every year in Texas alone immediately get U.S. citizen. And Jack Cafferty is asking what should be done about that.

And is it time for President Obama to stop blaming George W. Bush for the economy? I'll ask the president's senior adviser David Axelrod about that and a lot more.

And the real life prison break drama. Who's in danger right now with an armed and dangerous escapee very much on the loose?

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BLITZER: Let's get back to Jack for "The Cafferty File." Jack?

JACK CAFFERTY, CNN CORRESPONDENT: The question this hour, at least 60,000 babies born to noncitizens every year in Texas alone get U.S. citizenship. What should be done about that is the question.

Brent writes, "The 14th amendment ought to absolutely be amended to solve this problem, now that there are no slaves to protect, aside from all of us in the middle class, of course, but I digress. Since the overwhelming majority of illegal immigrants contribute absolutely nothing to taxes, education or health care but use the same infrastructure and resources as taxpayers do, which basically amounts to egregious grand theft and tax fraud, to say nothing about dishonor, we need to get down to business and start protecting the legal citizens of this country."

T.J. writes from Texas, "The illegal parents can go back where they came from and take any babies born in the U.S. with them."

Jack writes, "I can't wait until all these children start voting out the Republicans in Texas. There is hope for the future."

Larry in Texas writes from Georgetown, "For those of us who live in the great state of Texas, it's very obvious that we are paying for the people that are here illegally so they can have kids go to school and receive medical treatment and collect welfare. It's time to take back our country. I'm for changing the constitution to its intended purpose."

Louis writes, "Change the law so a citizen born here requires one parent to already be a citizen."

Sandy in Georgia writes, "I'm a fan of documenting the undocumented. You don't have to be legal, you don't have to be a citizen, but you do need to be documented. And as long as they're documented, they can work and pay taxes just like legal U.S. citizens. Once they're paying their fair share of taxes, I have no problem sharing the benefits of this country with them." Carol writes, "If the parents are here illegally and have children, the entire family should be deported. What is so hard about this?"

And Terry writes, "This is an absolutely preposterous idea. So someone born on U.S. soil would not be a citizen. What's the standard then? Will I have to be born to Republican parents on the fourth of July on an American flag? Would that be enough?"

If you want to read more on this, we got an awful lot of e-mail. You'll find it on my blog, CNN.com/CaffertyFile.

BLITZER: Was there a sort of, which direction more?

CAFFERTY: People are sick of illegal immigration in this country. They're up to the eyebrows with the fact that the federal government sits on its hands and does nothing, nothing, while we run trillion dollar deficits every year and people come here by the millions to take advantage of, you know, the things that are available in this country that aren't available where they're from. The public's fed up with it. That's gist of the mail.

BLITZER: We're going to talk about the 14th amendment with David Axelrod in the next hour. He's coming in, the president's senior adviser. Jack, thank you very much.

He's the youngest detainee in Guantanamo. Now his military trial is drawing international scrutiny. Our own Jeanne Meserve is standing by with the latest developments on what happened today.

Plus, the singer Wyclef Jean now firing back at the actor Sean Penn for allegations made about his run for president of the Haiti. You're going to hear how Wyclef Jean is now responding. Stay with us. You're in THE SITUATION ROOM.